Nebraska lawmakers on Tues gave second-round approval to bills exempting Social Security from the state income tax and cutting the top rate on corporate income taxes, but only after putting a pause into both to review their impact
Currently, Nebraska taxes Social Security only if the person’s adjusted gross income is over $44,600 or $59,100 for a married couple.
The original version of the bill phased out the tax over 10 years at a loss of $168-million dollars when fully implemented. It was revised on the floor to drop half the tax over 5 years, then evaluating whether to go the rest of the way.
The amended version says the Legislature’s intent is to complete the phase-out over the following 5 years, but it’s not binding. The changes passed 37-0 with the amended bill advancing on a vote of 44-0.
The corporate income tax reduction bill called for dropping the top rate from 7.81% to 6.84% in one year, but an afternoon compromise drops the rate to 7.25% over 2 years with non-binding language to reach 6.84% in 4 years.
Supporters argued that making the top rates for corporate and individual income taxes the same is a matter of fairness since S-corporations and limited liability companies pay the individual tax, not the corporate tax.
They also argued it would make Nebraska more attractive to large businesses that would create new jobs, but some lawmakers said it would make more sense to focus the $113-million in lost revenue on education and job-training programs.
The amendment passed 45-0 while the full bill advanced to final reading on a voice vote.